Potential

The April gas futures contract managed a minor gain Friday of8.4 cents to end the regular trading session at $5.270/MMBtu andclose a relatively quiet week on a somewhat sleepy note. For thetime being, the April contract appears essentially dormant within atrading range between $5.06, which was the low trade for April setlast Tuesday, and Wednesday’s high of $5.385, which was the initialreaction high after the AGA storage data was released.

Rumors last week about a potential marriage between Mid-Atlanticutilities Potomac Electric Power and Conectiv turned out to be onthe money. The two companies announced yesterday that Pepco willbuy Conectiv for a combination of cash and stock valued at $2.2billion or $25/CIV share, a 19% premium compared to Friday’s close.

Consolidated Edison Inc. called on FERC last Tuesday to enactmechanisms to limit the potential for price spikes in the New Yorkwholesale power market this summer.

A potential Sonat shut-in of gas behind Toca, LA processingfacilities over the holiday weekend (see Daily GPI, Jan. 16) was averted. Repairs werecompleted at Enterprise’s Toca II plant and it resumed operationsSaturday evening, the pipeline said. That means bothEnterprise-operated facilities and the Western-operated plant “are nowprocessing all of the gas upstream of the plants based on theirrespective commercial arrangements,” Sonat added. It encouraged “allparties to maintain arrangements that will keep the processing plantsoperating at the level necessary to process all gas upstream of Toca.”

With reserves dropping due mostly to in-state transmissionproblems causing potential shortfalls centered in the northern halfof the state, California’s state-chartered independent systemoperator (Cal-ISO) went after emergency supplies Tuesday byinvoking the federal order issued by DOE Secretary Bill Richardsonlast week as California faced the prospect of rolling blackoutsbecause it reserves dipped below 1.5% at one point (Dec. 13).

Despite the danger of a consumer backlash to soaring energyprices this winter and the potential for reregulation, the CEO ofThe New Power Company, the self-proclaimed first national retailenergy marketing company, believes the future is bright for hiscompany as it enters its first winter in operation.

In the midst of a real potential cold weather energy/supplycrisis hovering over the state, the California Energy CommissionWednesday approved a new 500 MW natural gas-fired electricgeneration plant that could help head off shortages in 2002 and twopeaking plants totaling 371 MW that should be online by theupcoming summer of 2001.

Some state officials already are dubbing the upcoming heatingseason as California’s “winter of discontent” as continued highwholesale natural gas prices are driving up consumer bills andstate regulators look at options for unbundling Southern CaliforniaGas Co.’s transmission and storage system.

It had seemed that Wednesday afternoon’s large screen uptickfollowing the storage report might be the tonic needed by alistless cash market to regain its previous strength Thursday.Instead, a humongous Nymex downturn and fresh forecasts thatweather next week might not be as cold as anticipated combined tosend most cash prices lower by a dime or so. Gains were rare andsmall.